What is corporate governance?

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Posted 9 years ago

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Corporate governance deals with the rights and responsibilities of a company’s management, its board of directors, shareholders and various stakeholders. Good corporate governance contributes to sustainable business practices that enhance companies’ long-term performance and value. Poor corporate governance, on the other hand, weakens a company’s potential and can lead to financial problems and even fraud. The primary corporate governance mechanism is the board of directors, and its primary purpose is to combat the agency problem created by the separation of ownership and control. This separation is especially acute at public companies, which can have thousands of anonymous shareholders, and creates incentives that can lead senior managers to put their personal interests above those of the company's shareholders.